Kirby, an Australian
manufacturer, hired International Cargo Control (ICC) to arrange for
delivery of machinery from Australia to Huntsville, Alabama through
end-to-end transportation.

Limitation
clause: bill of lading (contract) that ICC issued to Kirby
designated Savannah, Ga. As the discharge port and Huntsville as the
ultimate destination, and set ICC’s liability limitation lower
than the cargo’s true value, using the default liability rule
in the Carriage of Goods by Sea Act (COGSA) for the sea leg and a
higher amount for the land leg.

Himalaya
clause: the bill of lading also included this clause which
extends liability limitations to downstream parties.

Kirby separately
insured the cargo for its true value with Allianz Inc.

ICC hired a German
shipping company (Hamburg Sud) to transport the containers which
issued its own bill of lading to ICC designating Savannah as the
discharge port and Huntsville as the ultimate destination. This also
adopted the default rule.

Hamburg hired
Norfolk Railway to transport the machinery from Savannah to
Huntsville.

The train derailed
causing an alleged $1.5 million in damages.

Procedural Posture

Allianz reimbursed
Kirby and then joined Kirby in suing Norfolk in a Georgia Federal
District.

Norfolk argued that
Kirby’s recovery could not exceed the liability limitation in the
2 BOL. The district court agreed and granted Norfolk partial
summary judgment.

Kirby appealed.

The court reversed
saying that Norfolk could not claim protection under the ICC’s
Himalaya clause because it had not been in privity with ICC when
that bill was issued and because linguistic specifity was required
to extend the clause’s benefits to an inland carrier. It also
held that Hamburg was not bound by the Hamburg Sud bill’s
liability limitation because ICC was not acting as Kirby’s agent
when it received that bill.

Issue

Whether federal law
governs the BOL.

Whether Norfolk is
entitled to the liability limitation of both BOLs from the Himalaya
clause.

Whether traditional
agency law rather than the Great Northern rule should govern here.

Holding

Federal law governs
the interpretation of the ICC and Hamburg Sud bills.

Norfolk is entitled
to the protection of the liability limitations in both BOL. The
court of appeals erred in concluding that the Himalaya clause
requires such linguistic specificity or privity rules. The Herd
case simply says that contracts for carriage of goods by sea must be
construed like any other contracts: by their terms and consistent
with the intent of the parties.

The Great Northern
rule should rule. There was no traditional indicia of agency
between Kirby and ICC.

Ruling

When a contract
is a maritime one and the dispute is not inherently local, federal
law controls the contract interpretation.

The bills are
maritime contracts:

To ascertain a
contract’s maritime nature, the court looks at the “nature
and character of the contract”. The true criterion is whether
it has reference to maritime service or maritime transactions.

Fundamental
interest of maritime jurisdiction is the protection of
maritime commerce.

The fact that the
bills call for the journey’s final leg to be by land does not
alter the contracts’ essentially maritime nature. The shore
is now an artificial place to draw the line. Cargo owners can
contract for transportation across oceans and to inland
destinations in a single transaction. The assimilation of
land legs into international BOL should not render bills for ocean
carriage nonmaritime contracts.

According to
Kossick, so longs as a bol requires substantial carriageof goods by sea, its purpose is to
effectuate maritime commerce, and thus it is a maritime contract.

The body of law
governing the BOL provides a limitation of liability.

The Hamburg and
ICC bills are maritime contracts because their primary objective
is to accomplish the transportation of goods by sea from Australia
to US.

Kossick:
“fringe benefit”.

Through bills
of lading: cargo owners can contract for
transportation across oceans and to inland destinations in a single
transaction.

The case is
not inherently local.

Kossick: When
state interest cannot be accommodated without defeating a
federal interest, as is the case here, then federal
substantive law should govern.

The touchstone here
is a concern for the uniform meaningof maritimecontracts. Applying state law to cases such as this one
would undermine the uniformity of general maritime
law.

Confusion and
inefficiency will inevitably result if more than one body of law
governs a given contract’s meaning.

ICC bol liability
limitation:

Himalaya
clause: these clauses extend the benefit of its
liability limitation to all agents, carriers and all independent
contractors whatsoever. These conditions for limitations on
liability apply whenever claims relating to the performance
of the contract evidenced by this BOL are made against any
servant, agent or other person including any independent contractor
whose services have been used in order to perform the contract.

COAGSA package
limitation operates as a default rule, but it also give the option
of extending its rule by contract.

the plain language
of the Himalaya clause indicates an intent to extend the
liability limitation broadly and corresponds to the fact that
various modes of transportation would be involved in performing the
contract. Because it is clear that a railroad was an intended
beneficiary of the ICC bill’s broadly written clause, Norfolk’s
liability is limited by the clause’s terms.

The same liability
limitation in a single BOL for international intermodal
transportation often applies both to sea and to land. A single
Himalaya clause can cover both sea and land carriers downstream.

Hamburg bol libility
limitation:

Great Northern
rule: when an intermediary contracts with a carrier
to transport goods, the cargo owner’s recovery against the carrier
is limited by the liability limitation to which the intermediary and
carrier agreed. The intermediary is not the cargo owner’s agent
in every sense, but it can negotiate reliable and enforceable
liability limitations with carriers it engages. This is a limited
agency rule.

Great
Northern rule requisite:The Great Northern rule
only requires treating ICC as Kirby’s agent for a single,
limited purpose: when ICC contracts with subsequent carriers
for liability limitations.

Limited
agency rule rationale:

1)
tracks industry practices

2) if
liability limitations negotiated with cargo owners were reliable
while those negotiated with intermediaries were not, carriers would
likely want to charge the latter higher rates, resulting gin
discrimination in common carriage,

3) this
decision produces an equitable result, since Kirby retains the right
to sue ICC for any loss exceeding the liability limitation to which
they agreed.

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